British pound declined on Tuesday trading right after the British Supreme court gave a ruling that the government needs approval and vote from the Parliament and its members in order to trigger Article 50 and begin Brexit talks. However, the currency was able to rally during mid-day trading session.
Sterling is currently trading at $1.2572 0931 GMT, against the US dollar, briefly rallying after opening at a lower rate during the trading session. The currency experienced a blissful trading from Friday to Monday opening as it took advantage of the weaker dollar due to Trump presidency uncertainties and the effects of the Brexit outline speech of British Prime Minister Theresa May from last week.
Brexit Effects on Pound Price Movement
The British pound has been performing well in the market from the beginning of last week and despite several declines, sterling was able to start this week with gains. However, pound lost its strong position once more after the Supreme Court’s Brexit ruling.
On January 16, pound opened in a more bullish trend, opening at $1.2048 and closed at $1.2038. By January 17, pound started performing stronger in the market, opening at $1.2054, but surged at $1.2392 as investors anticipated for May’s Brexit speech.
On the next trading session, pound lost some of its strength despite an increase in UK’s weekly earnings by 2.8%. Analysts feared a likely rise in inflation which led to the decline of the currency from $1.2395 to $1.2254.
By Thursday and Friday, sterling experienced quiet trading sessions, as investors focused on the inauguration of the US president. On January 23, pound opened at $1.2383 and closed with a stronger rate at $1.2522, as investors turned to the British pound as a safe haven over the uncertain US dollar.
On Tuesday, sterling started losing its strength once more as the British Supreme Court has finally given its ruling regarding May’s global plan after the country leaves the European Union.
Supreme Court Brexit Ruling
The UK Supreme Court has announced its court ruling on Tuesday, rejecting May and the Government’s appeal to trigger Article 50 of the Lisbon Treaty, which gives a member state of the European Union a right to legally divorce from the Union.
“By a majority of eight to three, the Supreme Court today rules that the Government cannot trigger Article 50 without an Act of Parliament authorizing it to do so,” stated Supreme Court President Lord Neuberger.
According to the court ruling, the Government needs to consider the vote coming from the Parliament in order to enact Article 50.This decision puts May in a more difficult position as the process is likely to take longer and could possibly result in a delay in triggering Article 50, where May plans to pass by March this year.
On May’s speech last week, she stated that the government would go to a ‘hard’ Brexit route, although they would still have discussions to enforce a free trade access in the single market. But, May still emphasized that she would still consider the decision of the Parliament regarding the matter.
Another contributing factor to the Supreme Court’s ruling was the possibility for a second Independence Referendum from Scotland, as the Scottish First Minister expressed that the nation would like to remain part of the EU and its single market.
The pound’s price movement is currently greatly influenced by political events in the UK. As the process on UK’s departure from the EU is still far from over, it is likely that future news relating to this matter is still to affect the price movement of the British pound. Investors should continue to monitor the events and updates regarding the Brexit plans from the Government and Parliament.
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